According to the Small Business Administration (SBA), 20% of businesses do not survive for one year. There are a number of reasons why a small business does or does not survive in the long run, but failure in the early days can usually be chalked up to a lack of preparation.
In this article, we will look at the top 10 things you need to know before starting a brick-and-mortar business. We will look at some things that apply to every business and others that are particularly important for brick-and-mortar stores.
1. A Business Plan is Critical to Your Success
A business plan is a written document that details your business goals. The plan has many components including an executive summary, product/service breakdown, and budget.
Business plans serve many purposes. They help prospective small business owners organize their existing ideas and address blind spots before starting the business. A business plan also serves as a recruiting tool. If you want to attract top talent to your new business, a well-thought-out plan can help to convince prospective partners or employees that your business is destined for success.
There are also external audiences, such as investors and financial institutions, that use business plans to determine if they should extend credit to a startup. So, if you hope to secure a business loan for your startup, you should create a solid business plan. We will look more at financing options later.
2. Consider the Legal Aspects of Your Business
The legal aspects of building a startup aren’t fun to figure out, but getting them wrong can break your business before it gets out of the gate. The basics include selecting the right business structure and obtaining licenses and permits.
The right business structure depends on a number of factors including the number of owners, your personal risk tolerance, your preferred taxation structure, and much more. You should talk to a lawyer before making a decision – the benefits of professional advice can outweigh the costs by quite a bit.
You will need certain licenses and permits depending on your type of business and your location. A furniture store in New York will need different licenses and permits than a restaurant in California, for example. You can Google your location, type of business, and licenses and permits (e.g., California restaurant licenses and permits) to get an idea of what your business needs. But, again, there are high stakes and it’s better to err on the side of caution and talk to a lawyer.
3. Where is Your Target Audience Located?
For an online business, the location of its target audience may not be much of a concern, but that’s not the case for a brick-and-mortar business owner. Your customers aren’t going to drive two hours to go to your physical location, so you need to ensure that you have enough potential customers in your immediate area.
You should start by determining the demographics of your target audience. Let’s say that it is all men between the ages of 18-30. Next, you should look at the demographics data of the area where you intend to open your brick-and-mortar location. If your target audience is overrepresented relative to the U.S. population, your business has a better chance of succeeding. If the opposite is the case, you may want to look at other locations.
4. Consider the Competition
As a brick-and-mortar retailer, your competition is not only other local businesses but also ecommerce businesses like Amazon.
There are a number of questions you need to ask yourself including:
- Can you differentiate yourself from the competition in a way that resonates with your target audience?
- Is there a high barrier to entry to offer the same products and services, or would it be easy for competitors to enter your market in the future?
- Do you have a prime location? A coffee shop located next to the train station, for example, may beat out a coffee shop in an area that receives less foot traffic.
These are just a few of the many questions you need to ask to see how your startup will stack up against the competition.
5. Your Domain Name is Key
So, you’re looking to start a brick-and-mortar business… but new customers are still going to find you online. This means you’re going to need to build an online presence. The right domain name can make or break your online presence.
Have you ever learned of a new business, Googled the business name, and had to scroll through two pages on Google before finding the right business? The experience probably hurt your perception of the company before you ever had a chance to see what they were all about. Why does that happen? In many cases, the owner picked a business name that was already used by many others.
Before starting your business, you should search the web to see if any other existing companies are using the name you have in mind. If there aren’t any others, the next step is to go to a domain name registrar, such as Namecheap, to see if you can secure the domain name (preferably .com) for a reasonable price. If you can get the domain name for a low price, then great. If not, you may want to choose a different business name.
6. Create a Marketing Strategy
Over the last few years, online platforms such as social media and search engines have become more popular ways to market a new business at the expense of traditional media channels like television, print, and radio.
A big reason why they are becoming more popular is because online marketing can be much cheaper than marketing through traditional channels. While some companies sink thousands of dollars a month into online marketing, it’s possible to build a website and optimize it for the search engines for a one-time cost in the four-figures and spend very little maintaining that online presence. With television, print, and radio ads, on the other hand, the ongoing costs are unavoidable.
For a small business owner, it’s essential to minimize costs in the early days. This means that online marketing might be your best option when you’re just getting started. Once you have a higher marketing budget, you can look to diversify into traditional media channels.
7. A Pop-Up Shop is a Low-Risk Way to Test Your Business Idea
To open a brick-and-mortar business, you need to lease retail space and configure the physical store to your specifications. That can be costly, as you’re on the hook for the start-up costs and locked in for the length of the lease agreement.
A pop-up shop is a retail store that “pops up” for a short period of time. They are often used to cash in on fads or seasonal demand, but can also be used to test a business idea. As a new business owner, you are obviously interested in the latter.
Here’s how it could work:
You open the pop-up shop in the area where you intend to open your brick-and-mortar store for a short period of time, perhaps a couple of weeks. You gauge the customers’ reactions to your new products and tally up the sales at the end of the two weeks. Based on the data, you decide to either proceed with the more permanent physical location or go back to the drawing board.
8. Your Customers Expect a Memorable Experience
It may seem like online retailers are taking over the world, but the perception doesn’t match the reality; according to the U.S. Census Bureau, ecommerce sales in Q3 2021 accounted for just 13% of total sales. So, brick-and-mortar businesses still account for 87% of total sales.
The online shopping experience is simple and straightforward, and ecommerce platforms often provide extremely competitive prices. So, why are so many consumers still opting to shop at brick-and-mortar retailers?
In many cases, they prefer the unique in-person shopping experience that can’t be provided by an online retail business. That customer experience isn’t a given at all brick-and-mortar stores, though. It’s up to you to create it.
You should make sure that your store is clean, well-organized, and has employees on the sales floor to help customers when necessary. In addition, it’s important to create a consistently fast and easy checkout experience for your customers. For some retail stores, self-checkout options can be a game-changer; according to a consumer survey from Shekel, 87% of shoppers prefer to shop in stores with self-checkout options during the pandemic.
9. Focus on Your Branding
Building a brand is a strong defense against the commoditization of your product. From your signage to the way that your employees interact with your customers, you have several tools at your disposal to leave a positive impression in the minds of your target market. Your branding also extends to your marketing assets, including your website, social media accounts, and print advertisements.
There are budget options to create a logo and brand style guide, but you definitely get what you pay for. A top-notch consultant is well worth the investment in many cases.
10. Consider Financing Options
A brick-and-mortar store can have high start-up costs including real estate, employee salaries, and inventory. If like many new small business owners, you don’t have enough cash in your business bank account to handle these expenses, you should consider financing options.
The ideal financing option for your brick-and-mortar business depends on a variety of factors including:
- Loan amount
- Time you can wait for approval
- Credit score
There are so many small business financing options available that it can be difficult to find the right option for your business if you shop on your own. That’s why you may want to consider using Biz2Credit to hone in on the right type of small business loan. The platform helps you find funding that is designed to meet your small business’ needs.
The Bottom Line
As Benjamin Franklin famously said, “By failing to prepare, you are preparing to fail.” The message definitely applies to the starting of a brick-and-mortar business. You don’t want to fall victim to paralysis by analysis, but at the same time, there are some things that you need to know before you start your business.